The other day, an economist who works for a nonpartisan congressional committee ran down the road to intercept me outside my house so we could talk about the debt ceiling debate. If the Republicans block raising the limit, he said, it would be economic disaster. How so? I asked. He walked me through the economics, but essentially it boils down to this: if the United States stops paying its bills, there will be instability in the financial sector that causes a severe constriction of the flow of credit, and that will trigger a repeat of the Bush-Cheney crash of 2008.
One lesson we learned—or should have learned—from the economic collapse is how the whole economy is held hostage by the pirates of Big Finance. If they freak out, economic contraction follows. (We've also seen that they can rebound much faster than the average working-class mug. Corporate profits were soaring two years after the 2008 calamity, yet unemployment remained stuck at historic high levels.) When Wall Street catches a cold, it can cause a pandemic for the rest of us. This unhealthy—and abusive—relationship might call for fundamental restructuring. But until then, Main Street does rely on the credit flow manipulated and exploited by Wall Street.
This ought to be kept in mind when reviewing the current jobs numbers. The report out this morning is lousy. Employers added only 54,000 jobs in May. The economy needs to gain about 150,000 jobs a month to keep up with population growth—and much more to recover the 8 million or so jobs lost in the recession. No matter what the Republicans say, messing around with the debt ceiling will not stimulate growth and job creation. And if it does look as if the Republicans will take the extreme step of preventing the debt ceiling from rising, there will be more, not less, uncertainty in the markets, which will inhibit economic activity. The Rs keep bleating that the markets need "certainty"—that was one of their arguments for permanently extending the Bush tax cuts for wealthy Americans—yet on this crucial matter they're willing to put the economy on a roller coaster ride, at a time when the jobs market seems to be weakening.
Heather Boushey, the senior economist at the Center for American Progress, put it this way:
Today’s data from the Bureau of Labor Statistics show that the job market has weakened considerably as employers added only 54,000 jobs in May. Yet Congress is dithering on increasing the debt ceiling. Failing to do so will lead to a sharp and immediate drop in economic output due to reductions in government spending and investment and their effects on the private sector. Employers’ confidence in the ability of Congress to act may be already shaken. Clearly, today’s data show that the labor market would be unable to handle such a large shock. Policymakers should focus first and foremost on doing no harm and acting to sustain, not derail, the economic recovery.
Though the jobs report is bad news for President Barack Obama and his Democratic colleagues, it also shows that it is a particularly dangerous time to playing political games with the economy.